TSMC Implements Dual Initiatives to Empower Suppliers for Sustainable Operations

TSMC is committed to building a resilient supply chain as the cornerstone of its sustainable supply chain management. To ensure suppliers’ facilities and production lines meet TSMC’s stringent standards while enhancing their self-management and improvement capabilities, TSMC has simultaneously launched two key initiatives: the Maintain the Old as the New project and the New Factory Construction Plan. These initiatives focus on three major aspects—Facility Renovation, Maintenance and Repair process, and Equipment Replacement—targeting local suppliers' operational sites. The goal is to aid these suppliers in establishing robust procedural management mechanisms that enhance their adaptability to anomalies. Moreover, TSMC guides suppliers in incorporating essential standards and management processes aross six key areas—Business Continuity Plan, Production Line, Quality, Environmental Safety and Health, Fire Control, and Green Supply Chain—into their new plant designs. This proactive approach helps avoid potential non-compliance costs down the line. As of August 2024, the Maintain the Old as the New project has successfully reduced the number of production line anomalies for five suppliers from 513 instances in 2022 to just 82 instances, achieving an 84% reduction. Additionally, after the replacement of outdated equipment, the project has saved a total of 1.155 million kWh annually and reduced carbon emissions by 572 metric tons. Meanwhile, the New Factory Construction Plan has completed design optimization for 16 new supplier factories, promoting both the upgrade and energy efficiency of supplier facilities.

Three Major Aspects to Enhance Management and Strengthen Operational Stability

Effective facility maintenance and construction are vital for ensuring a stable supply chain. Based on assessments of equipment maintenance quality, repair mechanisms, and frequency of abnormal events observed in on-site audits, TSMC has selected target suppliers to implement the “Maintain the Old as the New” project. This initiative first identifies the common issues causing abnormalities in suppliers' production lines and then supports them in three key areas: establishing maintenance and repair processes, regularly tracking improvement progress, and guiding suppliers in developing a procedural management model that handles abnormalities from occurrence to resolution. This comprehensive approach has significantly reduced the frequency of abnormalities, with the average repair time per incident decreasing from 12.3 hours to just five hours, resulting in a 59% increase in efficiency.  TSMC also collaborates with suppliers to set equipment replacement standards and calculate energy-saving benefits, helping suppliers recognize the advantages and encouraging them to replace outdated equipment. This energy-saving strategy is also incorporated into the New Factory Construction Plan, enabling suppliers to select and implement energy-efficient equipment during the design phase of new factories, thereby enhancing their green manufacturing capabilities.

Upgrading New Factories in Six Key Aspects to Optimize Operational Quality

Regarding the construction of new factories by suppliers, TSMC establishes design standards based on governmental regulations, Best Known Method (BKM), and audit experience. TSMC involves itself from the very beginning of a supplier’s new factory need. The Company ensures that suppliers implement the desired design directions through questionnaires, on-site interviews, and audits. Additionally, under the green supply chain initiative, TSMC encourages suppliers to use high-efficiency fans that are made of fiberglass reinforced plastic (FRP) instead of aluminum alloy to enhance the operational efficiency of cooling towers. TSMC has executed several improvements across 16 new supplier factories. In the realm of business continuity planning, TSMC assisted one supplier in adjusting their power deployment, separating electrical circuits for electronic-grade and industrial-grade production lines to prevent joint interference. Regarding production lines, TSMC recommended three suppliers install distributed control systems (DCS) for real-time monitoring and process data verification. For quality management, TSMC optimized filter planning for seven suppliers, establishing reserved spaces to accommodate future specification changes. Lastly, in the areas of environmental safety, health, and fire control, TSMC enhanced fire detection, shock-proofing, and environmental design in large utility machinery for five suppliers, significantly strengthening factory protection.

TSMC is committed to promoting the sustainable development of its supply chain. In addition to expanding the Maintain the Old as the New project among the top 20 carbon-emitting suppliers, which primarily consist of bulk chemical and bulk gas suppliers, TSMC will include 36 new supplier factories in the "New Factory Plan." The Company will collaborate with external experts to organize themed workshops and forums. These events will facilitate the exchange of ideas with suppliers on optimizing and maintaining production lines in both existing and new factories, aiming to reduce operational risks in the supply chain and achieve mutual benefits for the industry.